STX - Earnings call transcript Q1 2018 | Seagate Technology Holdings plc

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Operator

Good day, and welcome to the Seagate Technology Financial First Quarter 2018 Financial Results Conference Call. My name is Vinyl, and I will be your coordinator for today. At this time, all participants are in a listen-only mode.

Following the prepared remarks, there will be a question-and-answer session.

As a reminder this conference is being recorded for replay purposes. would Senior turn and Vice I to call Treasurer. time, Scolnick, Kate President, this like the to over At Investor Relations Please proceed, Kate.

Kate Scolnick

morning, to Good and call. you. Thank everyone, today's welcome

Chief executive President quarter Vice Chief XXXX our Relations and Financial our Investor are Seagate's detailed Morton, posted and from site We've on press today and Dave our me Dave Joining at September Mosley, earnings Executive Officer\. supplemental Officer Executive for team Seagate.com. release information

the for we September for call, During will company's and highlights for provide review outlook quarter, today's the then the the open questions. quarter December the call

about We recognize are do half work initiatives Thank our memory including call a is prepared remarks. interest of a deeper the there portfolio as areal following more of assisted high market to level recording. will in our heat an accommodate to go density remarks your questions and a silicon lot planning roadmap you. approximately for our learning with the magnetic best technology our in strategic we We understanding advanced hour few in permits. Seagate's and We've prepared today improvements time

on to update early figures look we'll of However, results investors we will Investor a GAAP supplemental GAAP call and of forward the to available refer XXXX. section figures in for strategic reconciled to on Non-GAAP be our and sometime are On our planning today, our September website. today the focus call information measures. non-GAAP our

of measures cannot to of non-GAAP measure that and/or available guidance be the these comparable measures, items GAAP unreasonable non-GAAP effort. control not We impact a predicted. measure corresponding have Accordingly, financial directly not out are because reconciled guidance GAAP without reconciliation reasonably to most is financial the the our measures material our

date. term product statements our transactions be long should equity These forward-looking supplemental anticipated subsequent and that website. access products, ahead, capital reminder, demand, results could and based to operating are these technology our forward-looking of of filings factors current like performance, go the and Information contains I company's vary as company's on to concerning NAND a this SEC to conference company's the over section to statements Actual materially are the upon supplies, and advancements, call any results information contained of would uncertainties, in management's bank future and development from other Investor now demand differ and posted Mosley. on not call statements. cause financial risks, about today's turn forward-looking conditions. Dave customer from relied general As assumptions consummation may private statements the the Please market and the Dave. for views

Dave Mosley

today. morning, Thanks Kate. for joining everyone and thanks Good us

led non-GAAP a operating unit earnings price by announced earning Toshiba Dave Corporation. Toshiba Seagate then expenses down call, operations million, for drive quarter. $X.XX. gross the year-over-year. was the the XX% Seagate end certain entered operating for a On I'll results our million highlights of GAAP million cover capacity The X% $XXX will our was for quarter, the flow the I'll per revenues net exabyte the income and the Seagate average year-over-year earnings close of basis, expenses also quarter were of $XXX was $X.X achieved HDD this per of Corporation billion, were operational million, Private shipments trends across seeing financial were For September portfolio and selling cash income Morton approximately our December acquire average we're Beginning up in gross of Capital share margins with share that XX%, per and net the diluted diluted the today's exabytes, was per million. X.X CFO of of $XXX per XX% $XXX with million business, high-level from flow GAAP achieved a margins September XX%, $XX. $XXX of Memory Bain and call $X.XX. discuss $XXX our outlook the drive, consortium quarter to and Equity XX.X free down agreement September, terabytes Cash record year-over-year. record, HDD into At for participation has and an in non-GAAP with

be as to consortium the NAND a maintaining company. Memory part pleased facilitate of Toshiba are technology world-leading, help and independent to We

is with industry long-term this Capital Seagate's believe Memory, best interest with and We years, Bain impressed Toshiba our customers we in relationship is and to of worldwide. the that Over acquisition always consistent NAND developed a the of their storage leadership the course success been technology. have Toshiba of the and dedicated advancing many long-term in Memory, long-term

In addition, with to our NAND of expanding long-term expect enter product provide Memory, a that we portfolio. supply into and agreement raw Toshiba continuity for NAND will

ready a are We that have scale of across over today, broad markets. developed have our grow last products NAND technology and flash-based several multiple we storage the and to offering years portfolio

further now the future; forward however, over in closure. Morton the to to I'll turn be on operational NAND NAND will you Our call will customers This meaningful we value Toshiba Seagate their for the revenue depth solutions. Dave agreement the the updating opportunity potential deal has on storage that and until portfolio it storage continue to significant go increase innovating solutions or transaction providing with with closer into future needs, customers. providing to providing the more our activities. enable are not our to hybrid agreement fit details from look progress be the color storage for supply Memory growth to HDDs, We while we on of our Seagate's SSDs

Dave Morton

Dave. Thanks,

exabytes billion revenue of a drive For and in achieved quarter, record. storage, the also a X.X shipped September XX.X per record we an with capacity average terabytes, $X.X of

average we XX.X record per X.X shipped of market, HDD enterprise with exabytes, the terabytes drive. For a capacity

ago. ATB in last serve our portfolio hyperscale in and storage XX% Seagate, and capacity are for over years September X.X important nearline to demand confident strong The represent an from Our XX% up deployments nearline drive, growth terabytes year's drive cloud HDD per these for opportunity up the and average our reached environments. continues to products quarter designed two we per over

months to varied the cause four diverse capacity points terabytes for believe months, market stringent XX and we workloads. will customers we XX terabytes XX to application to well and Over Use strong cloud poised expect help our up cases terabytes other for for multiple span from points with certain next to to needs. capacity a our different applications Seagate, and requirements. with At we customer are two

XX over was SKU the Our revenue units, leading XX-terabyte our and X September threefold the quarter. from terabyte up enterprise million in nearline quarter, June product we helium shipped

we confident sequential product growth key achieved in our in also and competitiveness qualification across September feedback been XX-terabyte our are We quarter. our volume in processes. revenue helium has the customer excellent and nearline Customer

-- products the X-terabyte growth For XX-terabyte edge per the feedback Average Using revenue for areal XX% and capacity December per compute and customers helium volume a great perform are to we desktop and our X-terabyte year-over-year. ahead competition XX-terabyte platform important with to X.X-inch X-terabyte drive quarter, up are notebook of for notebook platter, continues the we exabytes in points. revenue compute our adoption this, needing density significant X-terabyte our X-terabyte, for Within indicates verticals, the grows. platform providing these verticals. our planning continues platter, In markets, XX% market X.X-inch well. as sequential was ramp year-over-year. our per consumer year-over-year, capacity and well Customer advantage, value for up

Our gaming year. average capacity up XX% last XX% business over grew revenue sequentially and was per drive

gaming in this our participation continue more experiences. be highest to that for customers the rich local on focused market, storage for in the selective areas mass We their we demanding are are and gaming capacity

quarter million, the XX% year-over-year. up revenue, non-HDD group, up from quarter-over-quarter XXX primarily and and silicon was Our cloud systems our in September XX%

expenses on XX% GAAP and operating million September slightly measures. were quarter year-over-year. Total Our restructuring due were other XXX expenses down on lower the to a than operating primarily million non-GAAP for cost-containment XXX forecast, basis and a basis,

improvements, of the computing million We approximately and our identify September result divested in by the majority revenues our year year XX will per in we remain which non-HDD million non-GAAP continue and on a a XX of our exit million and quarter, We to and for to million the quarter. cost for savings with cost approximately of September of products during continued high-performance assets, maintenance new impact areas expenses quarter approximately HDD calendar Capital ramp XXX tooling for capital portfolio, per were our year the expenditures utilize XXX track new the supporting manufacturing operating in equipment. redeployment, footprint revenue. which

than staging decrease sequentially million, was flow inventory payments signals. cash to include free related XX previously the October expenditures remain revenue flow announced strong less restructuring of consolidated XXX capital These a in and cash XXXX. and Cash and expect results for our we XXX September quarter charges FY in some approximately was related to from total X% operations quarter, to demand million. December For million

cash we improvements our from flow operations working quarter, least be quarter the business For capital December to the times than to outlook. two more in due September anticipate at

quarter and million remains ordinary in cash XXX the X.X ended September Our equivalents, with balance sheet cash – heavy with outstanding. billion healthy, and we shares

payable our the X, expense Our has will million. XX payment on approved board for September quarterly Interest for XXXX. January the September was dividend quarter quarter, which $X.XX be of

and million the XX Our given deployed rates. our to September well to low our senior level In capabilities, expense notes. continues within and maturities million towards debt X we and redeeming million XXXX structure financial redeem staggered of XXX shares interest be interest our quarter,

with As Memory the Private up support some Toshiba an has to business with transaction earnings. Upon of expect financial agreement by we and the short-term model We Overall, Dave the enter to to to execution reflects acquisition. our our we would expect be performance and to objectives. in financing we Mosley mechanisms, quarter Corporation. acquire balances billion our transaction to the Toshiba entered September agreements Memory, committed we Bain in participation the Toshiba announced closing, accretive fund existing the consortium supply in Equity to $X.XX and operational with improvement our noted, Corporation provide that led including of NAND cash end anticipate profitability to long-term financing September, this Capital into at

will the we business and Mosley. on ahead, now future back continue advancements the call markets. optimize I would go-to-market focus to Dave towards our portfolio and growth like to aligning Looking turn product our to opportunity

Dave Mosley

as increase optimize is benefits. service continue that storage companies significant the with exhibit Thanks, business they intact, Dave. data infrastructure The Critical provide and quality in massive ownership spending total and storage of have in products. mass our to service has leadership of Seagate providers growth to demonstrated continue cloud technology supporting solutions and demonstrate of hyperscale areal density generations cost appear and to their to offerings and trajectory the technologies ability momentum. reliability, and the greatest long-term and large growth

our in with to progress density last years, density shipping introduction and portfolio, which five continue SMR been the HAMR, the leader areal of to Over recording, have or XXXX. be towards we in magnetic expected heat-assisted volume is make and TDMR we the areal in technology solutions, our

for Over have technology HAMR samples substituted the these ramping past processes, year, than great with the of will we've not shipping more communicating high generation standard feedback using up now. drives, that we HAMR months our and with HAMR evaluation customer some six qualification of rich customers and we for value, from ago, changes Early current adopt. have capacity product shared customers in to We devices. production months a been that demonstrates that opens technology design technology for space believe and require been any

costs to order and are launch operating In our long-term HAMR in terms already model. the contemplated expenditure existing portfolio, expense in of capital investment our future

mentioned have our While at discussing density personally don't more forward next strategic areal looking am to development Kate time earlier. HDD I update future and we that today, technology about

With remain about transformative optimistic spending significant storage to as Turning storage Seagate. outlook. shifts macroeconomic the to trends. We high-capacity for mobile the client from continue major deployments opportunity place environment to enterprise current market marketplace cloud, well as our in server consumer mass taking and represent cautiously

IT of early late heels XXXX. the various XXXX On supply constraints, component in calendar and the we witnessed

in visible Sell-through reasonable. are closely. From for year. Seagate's point, appears inventory are us inventory inventory positions lower are, channel continuing and last than general, our monitor customers to our to outgoing that vantage We

the in December ecosystem, engaged strong in silicon seasonal normal again Almost compared our the demand first PCs anticipate and growth the of now and consumer are For including of vertical Cloud the all quarter, our exabyte growth market for businesses. to sequential year. exabyte we markets our growth with Systems other CSP markets, the major half in calendar

sequential expenses by capital to tightly, within with and as demand we environment, growth the sequentially their cash expenses In and our be fiscal on targeting from operating the quarter's cost customers, in working saw and X% Thank slightly summary, significantly this approximately up we to this $XXX down call expect the containment flow for suppliers the expand to quarter. manage X%, we open thank million consistent to call the slightly from and continue like XXXX; now operations of at range; up less I'd us improvements per achieve This revenues non-GAAP Given business X% results. today, XX% December our margins our further Gross for to sequentially sequentially, employees, than year. September joining last time costs. contributions for restructuring end our approximately to to is to quarter measures, quarter, and X% for questions-and-answers. partners you long-term up operating the better sequentially we'll XX% to with to

Operator

Edward question BTIG. And Thank our Parker of you. [Operator from line comes from the Instructions] first

Your line is open.

Edward Parker

to morning. in been was your the Thanks. and I wanted you couple like has non-nearline, And exabyte past the Great. mostly growth the quarter for so ships. actually of down about looks year-over-year ask Good quarters. nearline from it

little to So, more a over I what that recognize you're customers specifically XX was you're expect what really as from XX tough speak you Thanks. type what seeing a year, you bit next months? exabyte your segment, but hearing from of wondering in growth I and the last comp if would could to it's

Dave Mosley

Yes, Thanks, a Edward. tough is it comp pretty year-over-year.

think were March about November XXXX, I from strong in if calendar think, I XXXX, markets we geographically. all through

in the and chain, supply component spaces. nascent little pricing on some the further we've bit supply so some of about. those that So we various more cloud issues that CSPs the overbuy were actually which believe and strength We and components an talked existed caused strong, saw a of disruption and in of

some it is for growth them a large-scale have to high, architecturally those whether now still That's cloud And like to supply for figured maybe for early which so out And still of players high. the couldn't but July, the -- August or impacted talking say, smaller all But their the so, not had irrespective is would impact. quarter. turn markets, the to some they going they're the would bit I at chain and all build still cause started is data not to it's other September point, XXXX. back. the issues some in that was they to although all your yet who saw the suppliers supply the the of hear the way still it now of the of of in you're people back some on, build to And be point, want CSPs looks or respond scale. stretch centers exactly of markets, resulted to not of What the growth that that the we CSPs, them appears inside were structures coming growth in we this were out we -- to to to while. But level to seeing some it through that cost necessarily how before, back new exabyte solutions.

we're and that, world starting think on. the to think turn we're most I through I of seeing

Operator

Thank you. of question Morgan next Huberty from And our Stanley. Katy the line comes from

Your line is open.

Katy Huberty

you. morning. I Good follow-up enterprise want Thank the just segment. on to

and sequentially was While seeing compare, you're tough recover there more aggressive less pricing, sequentially a year-on-year. exabytes and decline the year-on-year. both But is did

cloud So, of in how more market? can you. much you pricing the shift just that versus mix talk to is about Thank aggressive

Dave Mosley

there on. Right, the I'd let talk I'll Katy, pricing. mix shift that say is Dave about going

Dave Morton

of Pricing that customers relatively you a may channel. same mix would versus has classify within normal as been I pricing across benign. more like-for-like a see Yes, consistent shift any

continue major as this has been point, area, exabytes rich pricing the in our And across so, to a all to of data factor expand nearline not your portfolio.

Dave Mosley

Right. Year-over-year, talking we were X last terabytes. about year,

smaller some high-end. about we're of Now very in Edward's the and But back applications talking players. the cloud XXs to now, at Xs, Xs and Xs relevant some question, especially the in even XXs are

So...

Katy Huberty

you. Thank

Operator

our Thank question Christian from of Capital. Craig-Hallum Schwab next the from you. line And comes

is Your line open.

Christian Schwab

hyperscale taking increased about have exabyte the thought? call next years about outlook for which Great. and do talk in great previously the as well, and the we're three the any -- offerings, Can you growth my cloud changes we what Thanks you quarter. for versus you over as hearing

Dave Mosley

the has Christian. previous growth, it I'd if exabyte about, question, both say, been great rather The people the this as at question last year have look asked muted aggregate. in you

means other at think some to dynamics. cloud, Long data's fact fairly back trend is of the year, of this it about And to we but that future. driven get that's trend in by growing a driven XX% the on the we're We've XX%. that openly, been that the talking off by term, we'll some

us healthy and growth I solution density areal fast can higher depends going on on it to the in to that's the we're still further We come trying that back, does with earlier. referred that have to. truly back they their going architectural Or with what's drives we on how some into respond the we're architectures line, it. can on actually they period of the it that applications? because something Now to fairly do specific people Are deploy? parts nuance to higher to And and system? gets of trend think capacity I that do have what's

Christian Schwab

you one leader, NAND And supply are the in be any years? could Great. three then quick broadening prepared give at follow-up, as technology to your as business guys of to state look you just just that with expectations long-term how with portfolio, obviously, business the five agreement drive solid far the big and

Dave Mosley

depends more into solutions. I detail will of the yet been don't are points we our exactly with to on, script, customers like means that our I on I have we've to of that think, say There options. a the doing I who deal. lot natures it work go the think customers because, on want Not the which really

varied think different many right interfaces portfolio solutions and our , too for too now, little I is actually, customers. a our

to I lot to think to want sure scale, going we make we think have but we a which have pick of that choose we're ones exactly and I options.

Christian Schwab

I don't Great. other any have you. questions. Thank

Dave Mosley

Thanks.

Operator

And question Loop Thank of from our the Capital. Baruah comes Ananda you. line next from

Your open. line is

Ananda Baruah

over solid back your move And and guys. just just would your I would on, I'll midpoint another for guess, conviction then the of take time the in too. congrats growth then get what to a love levers there, thanks And get the range? just the margin to make to be Hi, I to, one say, quarter.

move count, share to buying sort Is should to or opportunistic we of a share $XXX return you continue Your on these both it count at down. philosophy? Thanks, million to this. that of think levels about

Dave Mosley

Yes.

back. think, to or Obviously, answer. I go XXXX the point. I to exabyte that's was most And on early perspective, relevant muted growth back, We the it'll growth. Dave exabyte see come from let I'll count, think the think XXXX margin share Christian's question, rather on

Dave Morton

count, back overall that share returning XX% we've XX% to over allocation, the of it's flow Yes, capital our system been shareholders. to back over working within cash at the

has muted obviously, to which very our as in XX% we the flows, we've the continue fairly But and open-market. to we'll more convicted our continue see a a strength XX%. perspective. be in And in obviously, on to been NII cash been And still so, buybacks, dilution we're of reflection around

Ananda Baruah

Awesome. lot. Thanks a

Operator

of Cihra our Rob Thank line you. question Partners. the from Guggenheim next from comes And

is open. line Your

Rob Cihra

quick, if Two much. very could. thanks I Hi,

a cost nicely. but the digits. still exabyte get or you with think Thanks. business? can shipment low actually OpEx declines, cuts? you just think, of quickly now, is exabyte just then, that while, capacity think, more mission-critical, of guess, of keeping that's revenue And of like to you coming on looks cuts, cutting down enterprise, us sort pruning double do the Is -- declining or picked are declining of more do it Is the or looks discretionary-type percentage and kind I know OpEx flattish -- you portfolio a it's growth that like sort pace I for the I with On up, been

Dave Mosley

build the start with market impacted most we do enterprise was mix some particular. pricings. side, To the This So, I'll earlier point, of material in in the a year your mission-critical see of changes up by in the there. in one

do Those very quickly. lowest-capacity drives we order those because And of think of impacted drives. need not tail the some that'll up XXX a There's is X.X have are a actually value. a that, lot changing X.X-terabyte type sell rich, diverse not that of to Some on for long see that one-size-fits-all those especially of Mission-critical solution. mix And the -- gigabytes. space. we a are we architectures for applications that and it's are workload-intensive

see that Dave. I'll see going don't exabyte on significant tail. over the but then in I to you're you mix question, it to growth, OpEx So, the think hand longer will And

Dave Morton

in adjacent we've still portfolio In it, We call the just the the OpEx, then our have, some trying look of items denominator. you it's been also curtailing been still too we But hard. at have businesses. towards that common common when I'll some drive lowest specifically to

on very $XXX convicted I a to path glide we're enable on still achieving XXXX, much good that. we're the FY of million very the So, believe by and end

Rob Cihra

you. Thank Great.

Dave Mosley

Good, I more. think time have one for we

Operator

And you. question last comes of C.J. the from from Muse line Thank our Evercore.

line open. Your is

C. J. Muse

here? you. here? see And about and Thank you then second the you talk side, part But through a that for how on Curious a if your you from entirety, launch your if ago. Good digits of guess nearline is a question, Thank I side. as the can the look outlook difficult exabyte year business an you low Clearly, Intel you basis. outlook what morning. that on I enterprise its kind 'XX the it growing at from is in for in. of like look piece mid-single Yeah. could looks follow-up flowing question fitting through Skylight, to me the core business comp on had of you walk calendar of from enterprise at

Dave Mosley

Yes. Thanks CJ.

about I quite it talked the on bit think call. a we've

nearline on, that's the We of space, in and With why issues earlier, that some architectures providers with the tough in. go drives year-over-year seeing markets, invest the were the will be into especially on substantial some ramping of they now year. capacity that compare there to cloud the want market the the there and think is higher next growth smaller nearline now turning that geographically pretty

Now, to our going out investments will large can, go that do and we're as strategic turn calendar think better was into year do quickly these exabyte perspective. an 'XX to that have is that pursuing because are to to than make. obviously, are be companies job But year as we orders possibly agreements these from I calendar 'XX that

mix be the it space. different does exciting it This lower mission-critical that's I points points Skylight question, from overtime, and we the we some of to system for consistent believe the capacity our market, the are so said, latch? latch the for and pretty of and mean look one's mix different because interesting think, it's because, enterprise big mission-critical. of but these And actually On higher typically, move do that be will it's kind capacity that very back in mix-up a proposition up But look transitions Intel high, typically industry? quickly. very and we ourselves does when will a the We doesn't at that not of and market nature had the value discussions with some to things entire and interface on performance so. what Typically, as flushed future, will the towards the that

Dave Mosley

work year hard like things when on the all tough the back September very of Okay. coming. on, to good It's talking In call. It's you last were spoke a all suppliers, thank next their I see we for to forward good on to time slow investors, with quarter to we turning our and QX. half the and all and this August would to July, been of partnership. pretty their customers, look employees

Operator

and participating may great for thank day. conference. the disconnect. in Everyone, today's a And you have Ladies all does you gentlemen, conclude This program.

Seagate Technology (STX) 23 Oct 172018 Q1 Earnings call transcript